Midlands businesses are in line for some welcome tax news, according to VAT specialists at Grant Thornton's Birmingham office.

The prediction follows the publication of a report by HM Revenue and Customs that clarifies the VAT situation on share issues raised within the last three years.

The document, which expands on HMRC's initial interpretation of the European Court of Justice's Kretztechnik decision, expands the remit of the ruling to include a range of share or security issues, not just new share issues or flotations.

James Hurst, senior indirect tax manager, said: "HMRC has now confirmed that the Kretztechnik ruling applies to the issue of any type of share, security or units in collective investment funds.

"This means that associated VAT costs can now be treated as an 'overhead' of the company and, as such, are exempt from VAT."

The new stance is likely to be broadly good news for businesses although difficulties do exist when issuing shares or securities to overseas companies.

"Any company that has issued shares in the last three years, or is about to do so, should review its position," added Mr Hurst.

Meanwhile employers and pension fund trustees have been warned that an HMRC clampdown will prevent them from recovering a fixed percentage of their fund management charges.

Accountants Clement Keys says Customs has become aware that certain businesses have been abusing the use of a fixed recovery percentage and claiming back more VAT than the concession intended.

As a result, the end of the practice has been signalled by the authorities.

Now fund managers will be required to raise separate invoices for the different services they supply.